Frasers Property (formerly: Frasers Cpt (FCL))

[CY09]

I like the answer. IMO, this deal is bad for shareholders of Ascendas and the future "fools" who will be purchasing ascendas perpetual securities to fund this 1 Billion Deal. The winners of this are the REIT managers (GLC companies). I have never been interested in SGX reits because the odds are always stacked in favour of the managers (ironically most of them are GLC companies). You are buying leasehold land which will be zero eventually at end of lease, unlike many other countries who give mostly freehold lands (Australia, Germany, US, Japan). Also many parent companies will just keep spinning property off at the peak of the cycle, making it debt laden (e.g. Keppel REIT).

Back to FCL, I do agree an industrial REIT now will be a good offering. It will be good to list in SGX where their developed industrial assets have advantage over many of the smaller local reits which own leasehold sites while theirs is mainly freehold and with many yield hungry fools who will want to buy properties similar to GLC at high prices. If one is to value Fraser Industrial ppty, the cap rate is 6% to 6.5%. Furthermore, they can sell their developed land bank later to spin into their REITS. I am not optimistic of Australia's Industrial and office sector as they are a subset of Australia's economic performance which is likely to go downhill.

As for the commercial property, FCL should just sell into Fraser Commercial. So if one wishes to value FCL Australia commerical property, it will be down to simple cap rate comparison of the office building vis a vis similar comparable in Australia.